Analysis: Louisiana budget needs $200M from tax amnesty

As Louisiana's latest amnesty program for delinquent taxpayers begins Monday, state officials are grappling with dueling concerns as they urge people to pony up what they owe.

Lawmakers and Gov. Bobby Jindal's administration need the program to help drum up $200 million in back-owed taxes to balance this year's budget or face deep cuts in the state's health care programs.

But they also need to convince people and businesses that this latest amnesty program will be the last one for a long time, so taxpayers settle their bills on time and keep money flowing into state coffers.

The first phase of the program, which runs from Monday through Nov. 22, gives delinquent taxpayers the opportunity to remedy their tax bills without penalties and with only half the interest charges they would otherwise owe on the debt.

"It is an opportunity with some legal cover to get caught up," Revenue Secretary Tim Barfield said recently, describing it as a "fresh start" for taxpayers.

Details are available at www.ldrtaxamnesty.com.

Barfield said 443,000 taxpayers owe $1.4 billion in unpaid taxes, while another 3,000 businesses or wealthy individuals who owe $1.1 billion are involved in audits or litigation with the Department of Revenue over unpaid taxes. Both groups are eligible for amnesty.

Lawmakers approved plans for the tax amnesty program - which will have three different phases over three years - as a way to drum up cash for the $25.4 billion state budget for the fiscal year that began July 1.

They anticipated collecting $200 million this year from the program and plugged the expected money into the Department of Health and Hospitals budget to help pay for the state's Medicaid program that takes care of the poor, elderly and disabled.

The expected tax revenue is used to draw down federal Medicaid matching dollars, so if some of the money doesn't arrive as projected, the health care funding loss is multiplied.

Treasurer John Kennedy, a former Louisiana revenue secretary, was displeased with the way lawmakers chose to use the amnesty money and the frequency that such programs have been used.

"They didn't want to make the hard decisions about how to balance the budget. This was the easy way out," Kennedy said.

He said amnesty can help clean up old accounts and collect money, noting the revenue department did one when he was secretary. But he also said the program "is inherently unfair because you're rewarding people who disobeyed the law."

Louisiana has offered similar programs five other times, the most recent in 2001 and 2009. This is the second amnesty in Jindal's nearly six years in office.

The 2001 program drew in payments from more than 30,000 tax scofflaws and generated $193 million for the state, while the last program brought in $483 million from more than 40,000 delinquent taxpayers, according to the Legislative Fiscal Office.

Because of the frequency of the amnesty programs, Barfield and other revenue officials have acknowledged they have concerns that they could become a disincentive to people to pay their taxes on time. They've stressed they don't expect another such period after the most recent amnesty wraps up.

The current program stretches over three years. In addition to the two-month amnesty window beginning Monday, the state will offer two one-month amnesty periods in 2014 and 2015, but with less-generous terms.

"We're doing them much too frequently. All you're doing, particularly with large corporations, is encouraging them not to pay their taxes, dispute them and wait to get a good deal," Kennedy said.

The Jindal administration and lawmakers can only worry so much about that right now because they need tout the program and attract participants to keep the budget in balance.

Barfield's throwing his focus behind the effort.

The Department of Revenue has sent out hundreds of thousands of notices to those who owe unpaid taxes. The agency plans radio and TV announcements. Barfield also is doing a statewide tour about amnesty.

"The Legislature's made the decision, and I hope it works. But it's not terribly sound policy," Kennedy said.

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